Naked Economics Chapter 3 Summary

Chapter 3 Organizer

3.1 Establishing a Global Presence

|Why is achieving a competitive advantage a|Leads to increase sales and profits. |
|goal? |Major goal of corporations is to maximize profits. |
| |If you do not enjoy any competitive advantages you will lose market share (customers) = sales = profits. |
| |You will eventually go bankrupt. |
|Why is GDP per capita a good measure of an|GDP is measure of total value
|Includes items produced by foreign owned companies. |
| |Economic strength is measure by output and productivity |
| |The more you produce and the more efficient you produce the stronger your economy. |
| |GDP measures output but not necessarily productivity. |
|Why is GDP not completely accurate in |Since GDP only measures output and not productivity other measures have been developed to look at economy’s |
|measuring a country’s economic strength? |overall strength. |
| |The measure of GDP / capita is a better measure of economic strength it measures GDP per person vs. total |
| |A large country which produces more goods could have a lower GDP / capita which means it is less productive
|
|Why do companies invest in R&D? |Invest in technology to improve products/services and productivity. |
| |R&D is tied to improvements in technology. |
| |Improvements in technology are linked to many competitive advantages – lower costs, better quality, improved|
| |products |
|Why do countries invest in R&D? |Countries invest in R&D to grow their economies and make themselves more attractive to businesses. |
| |Many countries subsidize business R&D through educational institutions.